How To Invoice To Improve Cash Flow
Financial problems are not uncommon for startups, with nine out of ten startups today failing within the first year and often due to cash flow issues. In order to avoid issues with cash flow, it’s essential for small businesses and startups to have a range of strategies implemented for dealing with invoices from the very beginning.
With most startups relying on timely invoice payments from clients and customers in order to maintain a positive cash flow, ensuring that all measures are taken to encourage clients and other payees to make invoice payments in full and on time is absolutely essential. We’ve listed some of the main options that all startup owners should do in order to improve their cash flow and avoid non-payments.
Invoice factoring companies such as BlueVine can be an absolute God send for startup owners who are struggling to get their clients to pay invoices on time. When you use an invoice factoring company, the company itself will ‘buy’ your unpaid invoices for around 60-70% of the total owed, allowing you to access that money and use it for business expenses or other needs. Once your client has paid the invoice, the factoring company will then release the remainder of the payment to you, after taking a small percentage as their fee. Although using an invoice factoring company isn’t free, many startup owners owe their success to invoice factoring, as without it they would not have been able to pay important business costs due to invoices being left unpaid or late payments being made.
One of the easiest yet most effective items that you can do as a startup owner in order to encourage better cash flow is to send all invoices electronically. When you send an invoice via email or a service such as PayPal for example, your client will receive it immediately and will also be given the option to make the payment there and then, reducing the risk of them forgetting to pay or losing a paper invoice somewhere before making the payment. Along with that, paper invoices should also be avoided as not only are they less eco-friendly, they also take time to post and therefore you will be waiting days before your client receives the invoice, let alone pays it. Sticking to electronic methods of invoicing will ensure that the whole process runs as smoothly and quickly as possible.
Re-Word Your Invoices
Often, invoices go unpaid simply because the recipient didn’t quite understand what was being asked of them. When creating an invoice, the most important aspect is to keep it short and to the point so that you do not confuse your client when it comes to areas such as the deadline date for making a payment, or how much they owe to your company. Be sure to include clear information about how they are to make the payment and who the payment is going to be made out to. Making your invoices as easy as possible for clients to understand by avoiding filler words and using layman’s terms will help to avoid any issues with the payment and improve your chances of being paid in full and on time.
If you’ve just launched a startup and are already finding that many of your clients aren’t paying on time, offering incentives for those who pay their invoice before a certain time can help you to improve this situation. For example, a client is going to be far more willing to pay their invoice straight away if you offer them a small discount as a reward for making an early payment. On the other hand, you can also use future incentives, such as a small percentage off their next order to not only encourage clients to pay on time and in full, but also to come back and purchase from your company again.
Last but not least, being polite in your invoices is not only vital for your good reputation, but it can also encourage clients to make payments faster. Simple things such as using please and thank you in the write-up of your invoice, or the attached email may seem insignificant, but past research has shown that those who use their manners when invoicing tend to receive payments much more promptly.
For many startups, cash flow problems can often lead to failure. But, with the right invoicing tips and techniques, you can ensure that your startup enjoys a positive cash flow from the very beginning.